4 Ways To Save Thousands On Your Mortgage
Why are some of the most exciting milestones in life also the most stressful? Big changes are on the horizon and you’ve been putting in overtime, saving your money, and keeping an eye on the increasingly daunting housing market in your area. All you want is a place of your own to put down roots and watch your family grow. But along with the joy of buying your first home is the reality of mortgage rates, loan requirements, and purchasing costs.
Fortunately, we have some tricks up our sleeve! Well...not really tricks. More like lots of experience helping first time homebuyers get that shiny set of keys without totally breaking the bank. Here’s how to save thousands on your mortgage:
1. Get cozy with your FICO
Most lenders will use your three-digit FICO score (also known as your credit score) to determine the interest you’ll pay on your mortgage. A higher FICO score means lower interest rates, and vice-versa.
It’s a good idea to learn your score as early as possible when your new home is just a twinkle in your eye! Your bank should be able to assist you in obtaining your credit score. You can also order it at FICO.com.
A variety of factors can impact your FICO score. Yes, that department store card you opened and forgot to pay five years ago will still be there to haunt you. But there are lots of ways to boost your score—we’ll get to that in a minute.
2. Raise your credit score
If you’re wondering how to save thousands on your mortgage, this is it. The effort it takes to raise your score will be well-worth the money you shave off your loan in the coming years. Even a .5% difference in your interest rate could amount to savings of over $700 a year!
For reference, A score of 720+ is considered “excellent.” Anything below 700 is moving towards “average.” Around a score of 640, you may have difficulties obtaining a conventional loan.
There are a few short-term ways to bump up your score. But most of them will take some time, so start early.
3. Pick a lender who’s on your side
As a first-time homebuyer, you need to find a bank that you can trust to give you personalized, reliable service with your success at the forefront. A lender should be able to tell you how to save thousands on your mortgage based on your current financial situation and time frame.
Just like any major purchase, you should shop around. A good rule of thumb is to get at least three separate offers. When you’re given a loan offer, pay close attention to rates AND fees. Analyze them side-by-side with other offers. Attention to small details could save you a huge chunk of change!
4. Put as much down as possible
Lacking equity from a previous home purchase, first time homebuyers usually rely on cash down payments. The more you put down, the less you have to finance—saving you money on your monthly payment as well as saving thousands of dollars in interest over the course of the loan. Putting 20% or more of the purchase price down prevents the need for costly private mortgage insurance or for secondary down payment assistance loans.
Making smart moves in advance, shopping around, and providing a strong down payment are all guaranteed methods to saving a lot of money on your mortgage. Your future as a homeowner depends on laying a solid foundation today. You’ve got this!
- Bev O’Shea (January 24, 2019). What Is A FICO Score?
- NerdWallet (May 7, 2018). How Credit Score Affects Your Mortgage Rates
- TransUnion for Mint.com (September 5, 2018). 3 Not-So-Secret Ways to Raise Your Credit Score (And 1 Bonus Tip to Help Keep It High)